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Misleading analyses of poverty, complacency from policymakers will worsen India’s
inequality crisis
Lucas Chancel, Thomas Piketty
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Misleading analyses of poverty, complacency from policymakers will worsen India’s
inequality crisis

Inequality denialism is, of course, not unique to India, as we have seen at close quarters in
the US and elsewhere. Worryingly, however, this sort of complacency from policymakers and
the elites will only exacerbate India’s already ballooning inequality crisis.

Updated: April 15, 2024 09:51 IST

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Despite privileged access to all sorts of administrative data, the CEA has done little to shed
light on economic inequality. (Illustration by CR Sasikumar)Despite privileged access to all
sorts of administrative data, the CEA has done little to shed light on economic inequality.
(Illustration by CR Sasikumar)

Written by Nitin Bharti, Lucas Chancel, Thomas Piketty and Anmol Somanchi

“…obstinate ignorance is usually a manifestation of underlying political motives.” — Michal

Kalecki, ‘Political Aspects of Full Employment’, The Political Quarterly, 1943.

short article insert In a recent working paper, we document long-run trends of income and
wealth inequality in India. We find that inequality declined post-Independence, began rising
in the 1980s and has skyrocketed since the 2000s. Between 2014-15 and 2022-23, the rise
of top-end inequality has been particularly pronounced in terms of wealth concentration.
India’s top 1 per cent shares are now at their highest historical levels, making the Billionaire
Raj more unequal than the British colonial Raj and squarely placing India among the most
unequal countries in the world. We firmly stand by these findings. Nonetheless, given the
complexities in inequality measurement, we welcome constructive debate on ways to
improve our series, particularly for the last decade when data quality has significantly
deteriorated, as amply highlighted in our paper.

On March 27, two articles simultaneously appeared, questioning our results. One was
co-authored by the Chief Economic Advisor (CEA) to the Government of India (V Anantha
Nageswaran and Deeksha Supyaal Bisht, ‘Ten reasons why Piketty’s paper gets it wrong on
inequality in India’, Livemint, March 27) and the other by a former part-time member of the
Prime Minister’s Economic Advisory Council (Surjit S Bhalla and Karan Bhasin, ‘The devil is
in the footnote’, IE, March 27). After carefully reviewing both articles, we found little
constructive criticism, but plenty of misrepresentation and misunderstanding. This is perhaps
not surprising — it is hard to be both judge and jury when working closely with a
government. These articles are better read as textbook cases of inequality denial in action —
the authors pick one element irrelevant to our inequality estimates and twist it out of context
to cast doubt over robust results. By the time the air is cleared, the damage is already done.

Let us unpack how “inequality denialism” operates in this case.

Bhalla and Bhasin’s (BB) critique is largely built around footnote 36 (page 24) in our paper
that highlights the tentative nature of minor findings. Nageswaran and Bisht (NB) also refer
to the same footnote as a “QED moment”. Now, this “gotcha” drama would have been worth
some money if the footnote had absolutely any relevance to the core of the debate — our
inequality estimates. Alas, it does not, whatsoever.

poverty, poverty analyses, wealth inequality, India’s inequality crisis, poverty analyses
methods, post-Independence inequality, wealth concentration, indian express news Despite
privileged access to all sorts of administrative data, the CEA has done little to shed light on
economic inequality.

It only pertains to our claim that the Indian tax system might be regressive when viewed from
the lens of net wealth (rather than incomes); that is, the tax liability as a fraction of net wealth
might be falling as one gets wealthier. BB and NB pick this footnote about the tax system
and spin a false impression that it somehow applies to our inequality estimates — it does
not.

After wasting many precious words misconstruing our footnote, BB move on to comparing
our estimate of the top 1 per cent income share with two earlier papers — Abhijit Banerjee
and Thomas Piketty (2005; BP) and Lucas Chancel and Thomas Piketty (2019; CP). We
could certainly dive into the weeds, as two of us already have (‘The opaque 1%’, IE,
February 3, 2018), except that BB seem to have made an elementary error. They state that
“… the 1999 estimate of the top 1 per cent has been inflated to read 21 per cent”. After a
forensic investigation, we fail to find where BB got this figure from. In our recent paper
(Appendix Table B.1) as well as in CP, the top 1 per cent income share for 1999 is reported
as 14.7 per cent. Therefore, BB’s claim that we “… get a ladder increase in inequality
estimates for many years earlier with each update”, is simply false. Our best guess is that
they have carelessly misread the bottom 50 per cent share in 1999 (20.7 per cent) as the top
1 per cent share. No wonder they find nonsensical growth rates. Case dismissed.

A final word: The striking similarities between their botched critique of rising inequality and
their error-ridden and misleading analysis of poverty are hard to miss.

Despite privileged access to all sorts of administrative data, the CEA has done little to shed
light on economic inequality. When a serious academic attempt has been made, the least
one could expect of him is the “tedium of ploughing through 85 pages”. NB’s article is high
on polemics but fails to deliver any substantive critique. For instance, how is
multidimensional poverty relevant to income and wealth inequality? Similarly, to counter our
claim that the tax system might be regressive when viewed from the lens of net wealth, NB
cite two very interesting papers showing that the tax system is progressive in terms of
incomes (which we never denied in the first place), while conveniently ignoring Ram Singh’s
(2022; CDE-DSE working paper no. 331) novel work that came to the same conclusion as
us. NB are certainly right in saying that improved tax compliance could spuriously increase
income inequality in our series, but did they skip page 33 in the paper (section 7.5) where we
explicitly address this concern?

Quoting data from PRICE’s ICE360 survey, NB state that our paper “…by singularly focusing
on the top 1 per cent misses India’s emerging middle class”. This is a strange accusation
since we carefully study the full distributions of income and wealth, not just the top 1 per
cent. We even specifically highlight depressed growth rates in the middle of the distribution
(page 28). Be that as it may, NB also seem blissfully oblivious to the fact that we too utilise
PRICE’s ICE360 survey as an alternative to NSSO’s PLFS. What do we find? Between
2015-16 and 2020-21, the bottom 50 per cent income share fell sharply from 14.4 per cent to
a shocking 9.8 per cent, contrasted with a marginal increase in our benchmark PLFS-based
series (Appendix Figure B.3). The CEA cannot have the cake and eat it too — we let him
have his pick. We would have liked to address his other concerns too but are now out of
space.

One could certainly quibble with our methodology and estimates, but to those willing to
objectively engage with reality, India’s vulgar inequalities are staring back at us from all
directions. Inequality denialism is, of course, not unique to India, as we have seen at close
quarters in the US and elsewhere. Worryingly, however, this sort of complacency from
policymakers and the elites will only exacerbate India’s already ballooning inequality crisis.

The authors are affiliated to the World Inequality Lab at the Paris School of Economics

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